Citimortgage, Inc. v Ramirez

[*1] Citimortgage, Inc. v Ramirez 2018 NY Slip Op 50525(U) Decided on April 5, 2018 Supreme Court, Schenectady County Versaci, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 5, 2018
Supreme Court, Schenectady County

Citimortgage, Inc., Plaintiff,

against

Jose Ramirez; HOUSEHOLD FINANCE REALTY CORPORATION OF NEW YORK; INTERNAL REVENUE SERVICE - UNITED STATES OF AMERICA; "JOHN DOES" and "JANE DOES," said names being fictitious, parties intended being possible tenants or occupants of premises and corporations, other entities or persons who have, claim, or may claim, a lien, or other interest in, the premises, Defendants.



2017-0108



Attorneys for the Plaintiff:

Joseph M. DeFazio, Esq.

Akerman, LLP

666 Fifth Avenue

20th Floor

New York, New York 10103

Attorneys for the Defendant Jose Ramirez:

Christy Lay-Mumin, Esq.

The Legal Project

24 Aviation Road, Suite 101

Albany, New York 12205
Vincent W. Versaci, J.

In this residential mortgage foreclosure action, the Defendant-mortgagor, Jose Ramirez (hereinafter referred to as "the Defendant"), moves for summary judgment seeking dismissal of this action, a cancellation and discharge of the mortgage pursuant to RPAPL §1501(4), and for a declaration that his interest in the subject property is free from the mortgage. The Plaintiff, Citimortgage, Inc., opposes the Defendant's motion and cross-moves for summary judgment requesting that the Defendant's Answer and Counterclaims be stricken, and that an Order of Reference be granted.

Briefly, the facts as developed in the motion papers are as follows: On September 10, 2003, the Defendant purchased the subject property, located at 305 Christine Lane, Rotterdam, New York 12306. To facilitate this purchase, the Defendant obtained a loan through the original lender, Syracuse Securities, Inc. The Defendant executed a Note agreeing to repay the principal sum of $147,714.00 with interest as set forth therein. The Defendant also executed a Mortgage simultaneously therewith, pledging the subject property as collateral to secure the repayment of the Note. Following several subsequent assignments of the Note and Mortgage to various [*2]assignees, the Plaintiff became the assignee in or around October, 2006, and is the current holder of the Note and Mortgage. In or around December, 2006, the Note and Mortgage were modified by agreement, creating a new principal balance of $149,799.11.

On May 5, 2010, the Plaintiff commenced the first action against the Defendant to foreclosure on the mortgage, by filing a summons, complaint and notice of pendency with the Schenectady County Clerk's Office. The Plaintiff asserted in that action that the Defendant defaulted on the Note and Mortgage by failing to make the monthly installment payments which became due and payable as of September 1, 2009, and for each and every month thereafter. The principal balance due as of the filing of that complaint was $144,022.14 plus interest from August 1, 2009.

After being released from the mandatory settlement conference part in July, 2010, the case sat dormant with no action being taken by the Plaintiff to move the case forward through the litigation process or to prosecute the matter in any fashion. Accordingly, the Honorable Karen A. Drago, Acting Supreme Court Justice, issued a letter dated October 30, 2013, marking the case as dismissed. Thereafter, the Plaintiff moved to vacate Justice Drago's dismissal, amongst other requests for relief. By Decision and Order of the Schenectady County Supreme Court (Buchanan, Thomas D., S.C.J.), dated April 20, 2015, the Court raised doubt as to the basis for Justice Drago's dismissal of the action, but found that the mandatory language of CPLR §3215(c) provided the proper authority for the Court to dismiss the complaint as abandoned based on the Plaintiff's failure "to supply sufficient cause for its four-year delay in seeking default judgment." The Court dismissed the complaint, and denied the motion to vacate Justice Drago's dismissal as moot. The Plaintiff did not appeal that Order.

Nearly two (2) years later, on January 19, 2017, the Plaintiff filed a new summons, complaint and notice of pendency, commencing the instant action against the Defendant to foreclosure on the same mortgage. The Plaintiff asserts in this action that the Defendant defaulted on the Note and Mortgage by failing to make the monthly installment payments which became due and payable as of February 1, 2011, and for each and every month thereafter. The principal balance due as of the filing of that complaint was $140,237.97 plus interest from January 1, 2011. The Defendant joined issue by service of his Answer and Counterclaims dated February 13, 2017. The Plaintiff served a Verified Reply to Counterclaims dated April 27, 2017. After the case was released from the mandatory settlement conference part in April, 2017, the pending motion and cross-motion were filed.

In support of his motion, the Defendant argues, inter alia, that this action must be dismissed on the grounds that the applicable statute of limitations expired prior to the commencement of this action. An action to foreclosure a mortgage is subject to a six (6)-year statute of limitations. See, CPLR §213(4). Generally, when a mortgage is payable in installments, separate causes of action accrue as to each installment that is not paid, and the statute begins to run from the respective due date for each installment. See, Wells Fargo Bank, N.A. v. Burke, 94 AD3d 980.

An exception to this general rule is when the mortgage holder elects to accelerate the debt and declares the entire unpaid balance to be immediately due and payable. An election to accelerate the entire debt must be clear and unequivocal. The filing of a lis pendens and summons and complaint commencing a foreclosure action constitutes such a clear and unequivocal acceleration. See, Charter One Bank, FSB v. Leone, 45 AD3d 958; BSD 265, LLC v. HSBC Bank USA N.A., 2017 NY Misc. LEXIS 2510 [internal citations omitted].

If the mortgage debt is accelerated, "the borrower's right and obligation to make monthly installments ceases, all sums become immediately due and payable, and the six-year statute of limitations begins to run on the entire mortgage debt". U.S. Bank N.A. as Trustee for RASC-2005KS5 v. Wongsonadi, 55 Misc 3d 1207(A), citing, EMC Mtge. Corp. v. Patella, 279 AD2d 604, and Federal Natl. Mtge. Assn. v. Mebane, 208 AD2d 892. See also, Lavin v. Elmakiss, 302 AD2d 638, 639, citing, Loiacono v. Goldberg, 240 AD2d 476, 477; Goldman Sachs Mtge. Co. v. Mares, 135 AD3d 1121; Khoury v. Alger, 174 AD2d 918. In order to stop the statute of [*3]limitations clock from running, a mortgage holder who has elected to accelerate the entire debt may later revoke the acceleration, or in other words, decelerate the mortgage, thereby returning it to installment status. However, to be effective in resetting the statute of limitations clock, such revocation or deceleration must satisfy a five (5)-prong test: 1) the revocation must be evidenced by an affirmative act; (2) the affirmative act must be clear and unequivocal; 3) the affirmative act must give actual notice to the borrower that the acceleration has been revoked; 4) the affirmative act must occur before the expiration of the six (6)-year statute of limitations period; and 5) the borrower must not have changed his or her position in reliance on the acceleration. See, Lavin v. Elmakiss, supra, at 639, citing, EMC Mtge. Corp. v. Patella, supra, at 605-606, and Federal Natl. Mtge. Assn. v. Mebane, supra, at 894. See also, Golden v. Ramapo Improvement Corp., 78 AD2d 648, 650 ("only if a mortgagor can show substantial prejudice will a court in the exercise of its equity jurisdiction restrain the mortgagee from revoking its election to accelerate").

Applying these well-settled principles to the facts of this case, it is clear that the Plaintiff validly exercised its option to accelerate the maturity of the mortgage debt on May 5, 2010, the filing or commencement date of the first foreclosure action. The complaint in that action explicitly stated that the Plaintiff "hereby elects to declare immediately due and payable the entire unpaid balance of principal." (See, paragraph "10" of the 2010 complaint). Thus, the statute of limitations to foreclose on this mortgage began to run on May 5, 2010, the date of acceleration, and expired six (6) years later on May 5, 2016, more than eight (8) months prior to the commencement of this action on January 19, 2017.

The Defendant having met his prima facie burden establishing that this action is barred by the applicable statute of limitations, the burden now shifts to the Plaintiff to establish that this action is not time-barred, or at a minimum, to raise a triable issue of fact as to its timeliness. In opposition to the Defendant's motion, the Plaintiff claims that this action is timely because it affirmatively revoked its acceleration of the mortgage debt before the statute of limitations expired, thus tolling the statute. The Plaintiff produces as evidence of its revocation a letter addressed to the Defendant, dated April 14, 2016, which states in pertinent part that "any previous acceleration of your loan is revoked and nullified. By decelerating your loan, you are no longer obligated at this time to immediately pay all sums due and owing on your loan" (see, Exhibit "M" annexed to the Affidavit of Kathy Lynn Collier, AVP Assistant Officer Legal Support, sworn to on June 22, 2017). The Plaintiff asserts that this deceleration notice, which returned the loan to installment status, was mailed to the Defendant at the subject property address where he resides. The Plaintiff also claims, in further support of its alleged deceleration, that in July, 2016, it waived approximately $16,000.00 in principal and interest owed by the Defendant, which resulted in a new "paid-to" date on the loan of January 1, 2011. The Plaintiff submits a letter to this effect addressed to the Defendant, dated July 26, 2016 (see, paragraph "13" of the Affidavit of Kathy Lynn Collier, AVP Assistant Officer Legal Support, sworn to on June 22, 2017, and Exhibit "G" annexed thereto).

Several courts have addressed the heavy burden of proving an affirmative act sufficient to establish that the mortgage holder unequivocally intended to revoke its acceleration of the entire debt. See, e.g., Lavin v. Elmakiss, supra, at 639 (the mortgagee's "mere acceptance" of additional payments on the mortgage following the notice of acceleration "is not inconsistent with [its] insistence that the entire debt immediately be paid . . . [and] does not, in our view, constitute proof of an affirmative act of revocation"). Similarly, a dismissal of a prior action by the court for failure to prosecute, failure to appear at a conference, or for lack of personal jurisdiction, does not constitute an act of revocation. See, e.g., BSD 265, LLC v. HSBC Bank USA N.A., supra, citing, Clayton National, Inc. v. Guldi, 307 AD2d 982; EMC Mtge. Corp. v. Patella, supra; and Federal Natl. Mtge. Assn. v. Mebane, supra. With regard to a mortgagee's voluntary discontinuance of a foreclosure action, the trial courts are divided as to whether such discontinuance, without more, constitutes an affirmative act of revocation. Compare, U.S. Bank N.A. as Trustee for RASC-2005KS5 v. Wongsonadi, supra (plaintiff's voluntary discontinuance of the prior action was an affirmative act of revocation since it nullified the election to accelerate [*4]contained in the complaint) and Ditech Fin. LLC v. Naidu, 2016 NY Misc. LEXIS 4018 (stipulation discontinuing the prior action without prejudice acted as a deceleration of the debt) with BSD 265, LLC v. HSBC Bank USA N.A., supra (mere discontinuance of the foreclosure action, standing alone and without further proof expressing the mortgagee's intent to revoke the acceleration and reinstate the loan, does not constitute an affirmative act of revocation).

In the case at bar, the Court need not take a position on the effect of a voluntary discontinuance of a prior action because contrary to the allegation contained in the complaint, the prior action here was not voluntarily discontinued by the Plaintiff. The Plaintiff asserts at paragraph "14" of the complaint that it "will undertake to discontinue [the prior] action." The fallacy of this representation is exposed by Justice Buchanan's Order dismissing the prior action in April, 2015, as abandoned. The Plaintiff cannot endeavor to voluntarily discontinue an action that has already been dismissed by court order, and use that attempted discontinuance as evidence of an affirmative act of revocation. Furthermore, based on the case law cited above, the Court's dismissal of the prior action does not constitute an act affirmatively revoking the Plaintiff's election to accelerate the entire mortgage debt.

Thus, the only evidence the Plaintiff can present in support of its contention that it revoked its acceleration of the mortgage prior to the expiration of the statute of limitations, is its letter to the Defendant dated April 14, 2016. This letter, standing alone, is in the nature of an affirmative act, and since it is dated before the statute expired on May 5, 2016, it satisfies the first and fourth prongs of the test set forth above. However, despite the Plaintiff's representation that proof of mailing of this letter to the Defendant is included as part of Exhibit "M" annexed to Ms. Collier's Affidavit, no such proof of mailing is included therein or anywhere else in the motion papers. Moreover, the Defendant swears in his Affidavit sworn to on July 14, 2017, that he never received this letter or any letter from the Plaintiff waiving any installment payments.

Accordingly, a factual dispute exists as to whether the Defendant was given actual notice of the deceleration of the entire debt. However, even if this dispute was ultimately resolved in the Plaintiff's favor, thus satisfying the third prong of the test, the Plaintiff's attempt to revoke its acceleration of the mortgage fails because, as will be demonstrated below, the Plaintiff is unable to satisfy the remaining two (2) prongs of the test.

With respect to the second prong, the Court finds that the Plaintiff's attempted revocation was not clear and unequivocal. While the April 14, 2016 letter states that the acceleration is "revoked and nullified", and that the "loan is returned to installment status as a result of the deceleration", it also states in the very same paragraph that "[w]e may continue to proceed with collection activity, re-acceleration of the debt, and/or foreclosure initiation". The Plaintiff's use of certain "buzz words" may appear at first blush to be clear and unequivocal, but when the entire contents of the letter are read, a very different message is being sent that is not inconsistent with the Plaintiff's intention to continue to insist on immediate payment of the entire debt.

Proof that is even more glaring that the Plaintiff did not clearly and unequivocally revoke its acceleration is the fact that it continued to send monthly statements to the Defendant after April 14, 2016, stating that "your loan has been accelerated and the accelerated amount is now due", and demanding immediate payment of the total amount due on the entire mortgage debt (see, Exhibits "A" and "B" annexed to the Affirmation of Attorney Lay-Mumin, dated August 3, 2017). This language is directly at odds with the Plaintiff's alleged deceleration on April 14, 2016. When all of these documents are read together, the Plaintiff's position as to the status of the loan is anything but clear and unequivocal.

The Court will not simply stop at reading only half of the April 14, 2016 letter and view it in a vacuum as the Plaintiff would like. The Court must consider all of the record evidence submitted on the motions and view it as a whole. The Court also has the benefit of hindsight and knows that only a few months after the Plaintiff sent the letter revoking its acceleration of the mortgage, it turned around and filed this action claiming a new default date and demanding immediate payment of the entire debt. What is now clear to the Court is that the Plaintiff's purported revocation was plainly and simply an attempt to do an end run around the fast-[*5]approaching expiration of the statute of limitations and try to extend the statute so that it could continue to pursue its foreclosure of the mortgage. The Court will not countenance this improper litigation tactic and allow the Plaintiff to revive an otherwise stale claim.

With respect to the fifth prong of the test, the record is replete with evidence that the Defendant not only changed his position, but he substantially changed his position in reliance on the Plaintiff's acceleration of the mortgage dating back to May, 2010. The Defendant, while admitting that he initially fell behind on his mortgage payments in late 2009, claims that he reached out to the Plaintiff in an attempt to lower his monthly payment amount. He alleges that a representative of the Plaintiff advised him that the only way to lower his monthly payments was to stop making payments on the loan and then apply for a loan modification. The Defendant did as he was advised to do, and defaulted on the loan in September, 2009. Thereafter, the Defendant made numerous attempts to obtain a loan modification through the Plaintiff, and even hired an attorney to assist him with the application process. However, despite these attempts, the Plaintiff neither approved nor denied the Defendant's application for a modification of his loan. Instead, the Plaintiff accelerated the debt, refused to accept any further payments from the Defendant, and commenced the first foreclosure action against the Defendant in May, 2010.

Although the Defendant continued his efforts to apply for a loan modification, he relied on the Plaintiff's acceleration of the entire debt and the resulting cessation of his right to make monthly installment payments thereafter. The Defendant relied to his detriment on the language contained in the mortgage statements he received each month that "[a]ny partial payment that you make, other than a full reinstatement or payment of the total amount due, will not be applied to your mortgage but instead will be returned to you". Since the Defendant did not make any additional payments in reliance on the Plaintiff's acceleration of the mortgage in May, 2010, the total amount due escalated from an initial principal balance of $144,022.14 due as of the date of acceleration, to over $260,500.00 as of June, 2016. This extensive period of time during which the Defendant had no right to make monthly payments, was caused in large part by the Plaintiff's four (4)-year delay in moving the first foreclosure action forward. Even if the Defendant had been ready, willing and able to resume making monthly payments, he was prevented from doing so for six (6) years, while the interest, fees and escrow balance continued to accrue to approximately the same amount as the principal owed on the loan.

It is beyond doubt that the Defendant suffered substantial prejudice in reliance on the acceleration of the mortgage and will be further prejudiced if the Plaintiff is allowed to manipulate the process and benefit from its own neglect in timely and diligently pursuing its claim in the first instance. See, Deutsche Bank Natl. Trust Co. Ams. v. Bernal, 56 Misc 3d 915, 924. Accordingly, the Court is compelled to invoke its equitable powers to restrict the Plaintiff's desired remedy. See, Golden v. Ramapo Improvement Corp., 78 AD2d 648, 650. Having failed to meet all of the criteria for satisfying the five (5)-prong test, the purported revocation of the acceleration of the mortgage which the Plaintiff attempted to accomplish through its April 14, 2016 letter, is ineffective and invalid as a matter of law and as a matter of equity.

The remaining arguments advanced by the Plaintiff that the statute of limitations was tolled are equally unavailing and similarly without merit. The Plaintiff claims that the statute of limitations was tolled during the entire pendency of the first foreclosure action pursuant to the strict provisions contained in RPAPL §1301(3) that prohibit the filing of a subsequent action while the former one is pending. The Plaintiff adds that pursuant to CPLR §204(a), the commencement of the instant action was stayed during the pendency of the first action by the prohibition contained in RPAPL §1301(3). Apparently, the Plaintiff is attempting to use this statutory prohibition to argue that at the same exact time as the six (6)-year statute of limitations begins to run upon the commencement of a foreclosure action, the limitations period is simultaneously tolled until that action is dismissed, and then starts to run again for another six (6) years from the date of dismissal of the earlier action.

To accept the Plaintiff's argument would mean that a mortgagee could potentially extend the statute of limitations ad infinitum by commencing an action, waiting until it is dismissed, [*6]filing a new action, waiting until that one is dismissed, filing a third action, and so on. Creating such an indefinite tolling of the statute of limitations is clearly not the purpose of the prohibition contained in RPAPL §1301(3), nor its intended effect. The Plaintiff's argument is illogical and not supported by the law.

Nor was the statute of limitations tolled while the first foreclosure action was assigned to the mandatory settlement conference part. To the extent that the Plaintiff argues that it was tolled during this time, there is simply no authority to support such an argument. In any event, the case was released from the settlement part in July, 2010, so even if the statute was tolled until then, it would have expired in July, 2016, which is still six (6) months prior to the commencement of this action.

Lastly, any efforts made by the Defendant to obtain a loan modification after the mortgage debt was accelerated do not serve to toll the statute of limitations or restart the limitations period. The Defendant was simply trying to save his home, and never agreed to stay or extend the time period within which the Plaintiff must pursue its claim. Furthermore, despite the Defendant's efforts, no such modification agreement was ever entered into, and as such, the Defendant never made a new, unconditional promise to repay the loan. He simply made an offer that was never accepted by the Plaintiff, and is therefore not actionable. Since the Plaintiff is suing on the original mortgage debt, not any newly modified one, the limitations period is unaffected by the Defendant's unsuccessful attempts to apply for a loan modification during that time period.

With respect to the Defendant's request for an award of attorney's fees pursuant to RPL §282(1), the Court must deny this request at this time. The Court agrees that the Defendant would be entitled to an award of reasonable attorney's fees and/or expenses pursuant to RPL §282(1) based on the Defendant's successful defense of this action. The Mortgage contains a covenant that the mortgagee has the right to recover reasonable attorney's fees against the mortgagor in a lawsuit for foreclosure and sale, which as mandated by RPL §282(1), implies a reciprocal covenant that the mortgagor has a similar right to recover reasonable attorney's fees against the mortgagee if successful in defending the lawsuit by way of counterclaim. However, the Defendant failed to submit any proof as to the amount of attorney's fees and expenses he incurred in this matter. The Defendant's counsel did not submit a retainer agreement, her time records, or any billing statements for the legal services she performed. Without such proof, the Court is unable to determine what a fair and reasonable award would be. However, now that the Defendant has successfully defended this action as determined herein, the Court will allow the Defendant to renew his request and file an application for attorney's fees with the proper supporting documentation. If the Defendant chooses to do so, such application must be filed, on notice to the Plaintiff, within thirty (30) days from the date of this Decision/Order.

Based on all of the foregoing, the Court finds that this action is barred by the statute of limitations. Accordingly, the Defendant's Motion for Summary Judgment is granted. The Plaintiff's Cross-Motion is denied as moot. The Complaint in this action is hereby dismissed. The Court directs the Schenectady County Clerk to cancel and discharge of record the subject mortgage pursuant to RPAPL §1501(4), and hereby declares that the Defendant's interest in the subject property is free from the subject mortgage.

The parties' remaining arguments, to the extent not specifically addressed herein, have been considered and found to be unavailing.

The foregoing shall constitute the Decision and Order of this Court.

ENTER:

Signed at Schenectady, New York, this 5th day of April, 2018.

____________________________________

HON. VINCENT W. VERSACI

Acting Supreme Court Justice